Rafael owned an apartment building that burned down. The empty lot is worth $70,000 and Rafael has
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Question:
Rafael owned an apartment building that burned down. The empty lot is worth $70,000 and Rafael has received $330,000 from the insurance company. Rafael plans to build another apartment building that will cost $425,000. His real estate adviser estimates that the expected value of the finished building on the real estate market will be $565,000 next year. The discount/interest rate is 11%.
What are the NPV and IRR of this decision?
A. $14,009; 14.14%
B. -$84,009; -32.94%
C. $84,009; 32.94%
D. -$14,009; -14.14%
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